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Diversity, Inc.

For an increasing number of the nation's 70 million minorities
today, getting up to go to work in the morning means heading off to
their own businesses.

Today, more than 4 out of every 100 minority Americans in the
U.S. own a business, says Richard N. Stevens, chief of market
access at the Minority Business Development Administration (MBDA),
a division of the Department of Commerce.

Stevens bases this statistic on the Census Bureau's recently
released Survey of Minority Owned Business Enterprises (SMOBE). The
report, released in July, is based on the 1997 Economic Census and
represents the latest figures available. As the minority population
shot up during the 1990s, entrepreneurial activity escalated at an
even more dizzying rate, the report reveals. During the decade, the
number of minority owned firms grew four times faster than all U.S.
firms, to more than 3 million companies. While U.S. firms grew by 7
percent during that time period, the number of firms owned by
African Americans increased by 26 percent, Hispanic and Asian firms
increased by 30 percent and Native American firms soared by a
staggering 84 percent. Although the number of firms owned by
minorities is still small compared with those owned by non-Hispanic
whites, this growth rate means that minority entrepreneurs are
closing ground fast.

What has accounted for this remarkable growth? It wasn't just
the late, great economy, says Gregory Fairchild, business professor
at the Darden Graduate School of Business Administration at the
University of Virginia, in Charlottesville, Va. While the strong
economy helped entrepreneurs of every race, a potent brew of other
factors turbo-boosted minority business growth. Among the factors:
a rise in immigrant entrepreneurs; unprecedented access to capital
by minorities and improved levels of educational attainment.

So as the '90s drew to a close, minority owned businesses
accounted for $591 billion in gross receipts. Athough data
collection methods have changed over the past decade, the SMOBE
estimates that minority receipts have increased 60 percent from the
start of the decade. (Minority owned businesses are defined as
companies where minorities own 51 percent or more of the
enterprise.) This growth has created a fast-growing and
increasingly lucrative market for companies offering a wide array
of products and services. From paper clips and ink toner to
accounting and legal services, minority entrepreneurs represent a
lucrative market. And yet, as a consumer group, minority magnates
are just beginning to appear on marketing radar screens, says
Victor F. Ornelas, president and CEO of Ornelas and Associates, an
advertising firm in Dallas. â€œMarketers assume that business
owners are all very well educated white folks,â€? he says.

That assumption is increasingly outmoded, as SMOBE data reveals.
Fifteen percent of the 20.8 million â€œnonfarmâ€?
businesses are minority owned. The largest segment is Hispanics,
who head 40 percent of all minority firms. Asians account for the
next largest group of minority entrepreneurs, but Asian outfits are
also bringing in more cash than other minority businesses. While
Asian firms make up 30 percent of all minority companies, they
account for 52 percent of all receipts from minority
businesses.

With more money than ever to spend, minority entrepreneurs are
also easy for businesses to find. Minority owned firms are
concentrated geographically â€” even more so than the minority
population as a whole, says the MBDA's Stevens. Seventy-two percent
of minority owned firms can be found in 10 states, with four states
(California, Texas, New York and Florida) accounting for more than
half of the companies.

These entrepreneurs may be condensed geographically, but they
are setting up shop in a variety of industries. SMOBE data shows
that minority business owners are moving out of less lucrative
fields that have been their province in the past. Forty-four
percent of minority entrepreneurs are in the service industry, with
nearly half providing business or personal services. Just 15
percent of minority business owners are in retail trade. While many
minority entrepreneurs preside over microbusinesses with tiny
revenues, a 60 percent majority have annual receipts of more than
$10,000, SMOBE found. Three percent have annual receipts over $1
million, compared with 5 percent of total U.S. firms.

How can marketers break into these ever-deepening coffers?
Alonzo Byrd, vice president at Detroit-based marketing
communications firm Fleishman Hillard Inc., advises establishing
connections within the minority business organizations by hiring
minority employees and using minority suppliers. Ad agency head
Ornelas agrees. For this market segment, â€œpurchasing
decisions are not just based on price and quality of
product,â€? he says. Minority entrepreneurs also evaluate how
active a company is in their community before handing over their
business.

Aware of this mindset, several major marketers have built
goodwill to establish their brand. For instance, Chicago-based Bank
One Corporation has formed an alliance with the U.S. Hispanic
Chamber of Commerce, offering a co-branded credit card, among other
services. It's clear that increasing diversity hasn't changed one
truth about the United States: the business of the American people
is still business.

Forecast is American Demographics'bimonthly
newsletter devoted to census coverage. For a subscription, call
(212) 204-3877 or send an e-mail toebowman@mediacentral.com.

Business Instincts

Hispanics own the largest number of minority businesses, while
Asian firms have the most sales and receipts, according to the 1997
Economic Census report, released in July 2001.